Patent Pools

As discussed in Section IV.B above, when multiple entities each hold patents necessary to conduct research in a particular field or to exploit a particular technology, blocking or thicket situations may arise to limit overall innovation and technology development. Patent pools are private arrangements among patent holders that enable the participants each to operate under the others’ patents, to manage and administer the pooled patents on a centralized basis, and often to grant licenses of the pooled patents to third parties, with the proceeds split among the pool members according to an agreed formula.³⁸⁴

Because the holders of complementary patents frequently are competitors, antitrust considerations are relevant in the formation of many pools. One of the earliest patent pools challenged on antitrust grounds involved four leading oil companies that combined their patents covering the processes for extracting excess gasoline from crude oil (“cracking”).³⁸⁵The pool was challenged by the government as an anticompetitive agreement among competitors.³⁸⁶ But in Standard Oil Co.

(Indiana) v. United States,³⁸⁷ the Supreme Court held that

“[a]n interchange of patent rights and a division of royalties . . . is frequently necessary if technical advancement is not to be blocked by threatened litigation.”³⁸⁸The Court thus

383. Id. at 18413–15.

384. See, e.g., World Intellectual Prop.Org. (WIPO), Patent Pools and Antitrust – A Comparative Analysis 3 (Mar. 2014), http://www.wipo.int/export /sites/www/ip-competition/en/studies/patent_pools_report.pdf (last visited Nov.

16, 2016).

385. See Standard Oil Co. (Ind.) v. United States, 283 U.S. 163, 165–66 (1931).

386. Id.

387. Id.

388. Id. at 171.

recognized the pro-competitive benefits that could be achieved by eliminating blocking patent positions and thereby enabling greater innovation and technological development.

Patent pools exist today in a variety of “high technology”

industries including semiconductors, consumer electronics, computing, and telecommunications.³⁸⁹ Echoing the Supreme Court’s reasoning in Standard Oil (Indiana), the Department of Justice has typically viewed such pools with approval, citing their ability to “create substantial integrative efficiencies by reducing the time and expense of disseminating the patents to interested licensees, clearing blocking positions, and integrating complementary technologies.”³⁹⁰

Despite the commercial success and broad market adoption of patent pools in fields such as consumer electronics and semiconductors, commercial patent pools have not achieved similar levels of success in other industries. Notably, despite frequent calls for the pooling of patents in the biotechnology industry,³⁹¹ such calls have to date resulted in little patent pooling activity among commercial firms.³⁹²

There are several possible explanations for this failure.

First, patent pools come at a steep cost, driven largely by antitrust compliance. A patent pool may stifle competition if it contains patents covering substitute technologies (i.e., it is desirable for alternative technologies to compete in the marketplace, which is less likely to occur if potentially

389. See, e.g., Jonathan M. Barnett, The Anti-Commons Revisited, 29 HARV. J.L. & TECH. 127, 191–96 app. (2015) (cataloging more than 100 IP pools from 1900 onward); Jonathan M. Barnett, From Patent Thickets to Patent Networks: The Legal Infrastructure of the Digital Economy, 55 JURIMETRICS1 (2014) (surveying information and communication technology pooling and cross-licensing arrangements); Michael Mattioli, Communities of Innovation, 106 NW. U. L. REV. 103 (2012); Richard J. Gilbert, Antitrust for Patent Pools: A Century of Policy Evolution, 2004 STAN. TECH. L. REV. 3 (2004); CARLSHAPIRO& HALR. VARIAN, INFORMATIONRULES: A STRATEGIC GUIDE TO THENETWORKECONOMY206–24 (1999).

390. U.S. DEP’T OF JUST. & FED. TRADE COMM’N, ANTITRUST ENFORCEMENT AND INTELLECTUAL PROPERTY RIGHTS: PROMOTING INNOVATION ANDCOMPETITION71 (2007) [hereinafter ANTITRUST ANDIPR], http://www.ftc.gov/reports/innovation/P040101PromotingInnovationandCompe titionrpt0704.pdf (last visited Feb. 22, 2016).

391. See, e.g., David B. Resnik, A Biotechnology Patent Pool: An Idea Whose Time Has Come? J. PHILSCI. & L., Jan. 2003, at 1; Richard C. Atkinson et al., Public Sector Collaboration for Agricultural IP Management, 301 SCIENCE174 (2003); Heller & Eisenberg, supra note 214, at 698–99.

392. See, e.g., Mattioli, supra note 389, at 114 (listing several such failures).

competing patent owners are compensated when the pool is licensed).³⁹³Thus, the pool must contain only patents claiming technologies that are complementary, and which do not act as substitutes for one another. For this reason, the parties forming patent pools typically engage in a lengthy and expensive process (usually through external counsel engaged for the purpose) of vetting each patent that is proposed to be included in the pool and confirming its essentiality to the pool.³⁹⁴

Another reason for the limited commercial success of biotechnology and some other patent pools may be the absence of market demand for such pools. In contrast to high-technology industries in which thousands of patents may cover a single product such as a smartphone, many believe that the feared “thicket” of biotechnology patents has not emerged in a way that hinders innovation or product development.³⁹⁵If not, then firms may lack the motivation to pool their patents together in order to conduct desired R&D.

Though patent pools have not gained significant commercial traction in non-high-technology industries, a number of pooling arrangements organized principally to achieve humanitarian ends have achieved some success. For example “golden rice,” a genetically-engineered Vitamin A-rich rice variant, was developed by researchers in Europe to address issues of malnutrition in the developing world.³⁹⁶Bio-agro firm Syngenta, another holder of key patents on the technology,

393. See Summit Tech., Inc., 127 F.T.C. 208, 217–24 (1999) (decision and order); ANTITRUST ANDIPR, supra note 390, at 76–78.

394. See, e.g., Essentiality Report, DVD6C LICENSING GRP., http://www .dvd6cla.com/essential.html (last updated June 10, 2014) (providing detailed

“essentiality reports” for each licensed standard).

395. See, e.g., David E. Adelman & Kathryn L. DeAngelis, Patent Metrics:

The Mismeasure of Innovation in the Biotech Patent Debate, 85 TEX. L. REV. 1677, 1729 (2007); David E. Adelman, A Fallacy of the Commons in Biotech Patent Policy, 20 BERKELEY TECH. L.J. 985 (2005) (showing biotechnology patenting is not adversely affecting innovation); Edmund W. Kitch, Comment on the Tragedy of the Anticommons in Biomedical Research, in 50 ADVANCES INGENETICS271 (2003); Richard A. Epstein & Bruce N. Kuhlik, Is There a Biomedical Anticommons?, 27 REGULATION54 (2004); Chester J. Shiu, Note, Of Mice and Men: Why an Anticommons Has Not Emerged in the Biotechnology Realm, 17 TEX. INTELL. PROP. L.J. 413, 450–54 (2009).

396. See Golden Rice and Intellectual Property, GOLDEN RICE PROJECT, http://www.goldenrice.org/Content2-How/how9_IP.php (last visited Oct. 11, 2016); Amanda L. Brewster, Audrey R. Chapman & Stephen A. Hansen, Facilitating Humanitarian Access to Pharmaceutical and Agricultural Innovation, 1 INNOVATIONSTRATEGYTODAY203, 205 (2005).

persuaded more than thirty academic and industrial holders of patents relevant to golden rice to license these patents to a non-profit organization for sublicensing on favorable terms for use by farmers in developing countries.³⁹⁷

Another prominent example of philanthropic patent pooling for global public health is the Medicines Patent Pool (MPP), which was launched in 2009 to improve access to affordable HIV/AIDS medications in the developing world.³⁹⁸ The MPP seeks royalty-free licenses from pharmaceutical patent holders and in turn grants low- or no-cost sublicenses to manufacturers that commit to produce and sell drugs to users in low-income countries.³⁹⁹ A few significant patent holders, including NIH and Gilead Sciences, have contributed licenses to the MPP; others who own relevant patents have declined to participate.⁴⁰⁰

Just as governments can issue compulsory patent licenses, they can also encourage the formation of patent pools when blocking patents or patent thickets may create perceived problems with technology development or dissemination. For example, in the early twentieth century, the aviation industry was subject to a series of patent disputes and litigation between rival aircraft manufacturers Wright-Martin Aircraft Corp. (successor to the Wright brothers’ original aviation patent) and Curtiss Aeroplane & Motor Corp.⁴⁰¹These disputes gave rise to fears within the United States government (primarily voiced by then-Acting Secretary of the Navy Franklin Delano Roosevelt) that the production capacity of the U.S. aviation industry could be hindered in a manner detrimental to U.S. engagement in World War I.⁴⁰²As a result of this intervention, the U.S. aviation industry formed the Manufacturers’ Aircraft Association (MAA), a patent pool that

397. See generally GOLDENRICEPROJECT, supra note 396.

398. See Medicines Patent Pool Announces First Licensing Agreement with a Pharmaceutical Company, MEDS. PAT. POOL (July 12, 2011), http://www .medicinespatentpool.org/medicines-patent-pool-announces-first-licensing-agreement-with-a-pharmaceutical-company/.

399. See About the MPP, MEDS. PAT. POOL, http://medicinespatentpool.org /about/ (last visited Oct. 11, 2016).

400. See Mattioli, supra note 389, at 124–25.

401. See Mfrs. Aircraft Ass’n, Inc. v. United States, 77 Ct. Cl. 481 (1933) (granting royalties for aircraft manufactured with patented technologies).

402. See id. (detailing the difficulties faced by the Army and Navy regarding patented aircraft technology and wartime production in 1917 and 1918).

provided for cross-licensing of aviation patents among the pool members, among other things.⁴⁰³

Proposals regarding patent pools have also been made in connection with climate change emissions abatement and SCE technologies.⁴⁰⁴These proposals are addressed below in Section VI.A.